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Calhoun: The NPS Institutional Archive
Theses and Dissertations Thesis Collection
2000-06
An alternative incentive system to improve
productivity at the Turkish Naval Shipyards
Ozdemir, Mehmet Hilmi
Monterey, California. Naval Postgraduate School
http://hdl.handle.net/10945/32944
NAVAL POSTGRADUATE SCHOOL Monterey, California
THESIS
AN ALTERNATIVE INCENTIVE SYSTEM TO IMPROVE PRODUCTIVITY AT THE TURKISH NAVAL SHIPYARDS
Principal Advisor: Associate Advisor:
by
Mehmet Hilmi Ozdemir
June 2000
KeebomKang Bill Gates
Approved for public release; distribution is unlimited.
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June 2000 Master's Thesis · 4. TITLE AND SUBTITLE 5. FUNDING NUMBERS
An Alternative Incentive System to Improve Productivity at the Turkish Naval Shipyards 6. AUTHOR
Ozdemir, Mehmet Hilmi 7. PERFORMING ORGANIZATION NAME (S) AND ADDRESS (ES) 8. PERFORMING ORGANIZATION
Naval Postgraduate School REPORT NUMBER
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11. SUPPLEMENTARY NOTES
The views expressed in this thesis are those of the authors and do not reflect the official policy or position of the Department of Defense or the U.S. Government. 12a. DISTRIBUTION I AVAILABILITY STATEMENT 12b. DISTRIBUTION CODE
Approved for public release; distribution is unlimited.
13. ABSTRACT (maximum 200 words)
This thesis researches to identify an alternative incentive system and determine whether it is feasible to implement it at
the Turkish Naval Shipyards. The purpose of the incentive system would be to help the shipyards decrease cycle time and
total cost, and increase productivity and readiness. This thesis also researches to determine the structural and statutory
constraints to the implementation of such an incentive system. The thesis examined the current structure, routine processes,
productivity, and compensation system at the Turkish Naval Shipyards. In this thesis, Arena Simulation Software is used to
simulate and analyze the current overhaul process within the shipyards. The thesis also examined the alternative incentive
systems that can be implemented at the shipyards. This thesis proposes a viable incentive system for the Turkish Naval
Shipyards.
14. SUBJECT TERMS 15. NUMBER OF
Incentive Systems, Productivity at the Turkish Naval Shipyards, Arena Simulation Model PAGES .. 78
17. SECURITY 18. SECURITY CLASSIFICATION CLASSIFICATION OF REPORT OF THIS PAGE
Unclassified Unclassified
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19. SECURITY CLASSIFICATION 20. LIMITATION OF OF ABSTRACT
Unclassified ABSTRACT UL
Standard Form 298 (Rev. 2-89) Prescribed by ANSI Std. 239-18
Approved for public release; distribution is unlimited.
AN ALTERNATIVE INCENTIVE SYSTEM TO IMPROVE PRODUCTIVITY AT THE TURKISH NAVAL SIDPYARDS
Author:
Approved by:
Mehmet Hilmi Ozdemir Lieutenant Junior Grade, Turkish Navy
B.S., Turkish Naval Academy, 1994
Submitted in partial fulfillment of the requirements for the degree of
MASTER OF SCIENCE IN MANAGEMENT
from the
NAVAL POSTGRADUATE SCHOOL June2000
ii
ABSTRACT
This thesis researches to identify an alternative incentive system and determine
whether it is feasible to implement it at the Turkish Naval Shipyards. The purpose of the
incentive system would be to help the shipyards decrease cycle time and total cost, and
increase productivity and readiness. This thesis also researches to determine the structural
and statutory constraints to the implementation of such an incentive system. The thesis
examined the current structure, routine processes, productivity, and compensation system
at the Turkish Naval Shipyards. In this thesis, Arena Simulation Software is used to
simulate and analyze the current overhaul process within the shipyards. The thesis also
examined the alternative incentive systems that can be implemented at the shipyards.
This thesis proposes a viable incentive system for the Turkish Naval Shipyards.
iii
TABLE OF CONTENTS
I. INTRODUCTION ...................................•.•......•..•..........•.•....•....•.......................•... 1
A. BACKGROUND ...................................................................................................... 1
B. OBJECTIVES .......................................................................................................... 2
C. RESEARCH QUESTIONS ...................................................................................... 2
D. SCOPE AND METHODOLOGY ........................................................... 3
E. ORGANIZATION OF STUDY .............................................................. 4
F. BENEFIT OF STUDY ..................................................................................... 4
II. CURRENT WORK AND COMPENSATION SYSTEM •.•................................ 5
A. INTRODUCTION .................................................................................................... 5
B. CURRENT WORK SYSTEM ................................................................................ 5
1. Overhaul Maintenance Process ............................................................................. 5
2. Personnel ............................................................................................................... 7
3. Productivity ................................................................................... 9
C. CURRENT COMPENSATION SYSTEM ............................................................ 11
III. LITERATURE REVIEW OF INCENTIVE SYSTEMS AND
INCENTIVES ...•..............•.••.....•.••.•....•...............••.......•............••. 13
A. INCENTIVE SYSTEMS ........................................................................................ 13
1. Individual Incentive Systems ............................................................. 14
2. Group Incentive Systems .................................................................. 17
iv
3. Organizational Incentive Systems ........................................................ 19
B. MONETARYINCENTIVES ................................................................................. 20
C. NON-MONETARY INCENTIVES ....................................................... 23
D. CHARACTERISTICS OF AN EFFECTIVE INCENTIVE SYSTEM ............... 25
IV. DIFFICULTIES IN IMPLEMENTING INCENTIVE SYSTEMS AND A
PROPOSED INCENTIVE SYSTEM····························~···················· ............... 27
A. INTRODUCTION .................................................................................................. 27
B. APPLICABILITY OF THE INCENTIVE SYSTEMS .......................................... 27
1. Culture ................................................................................................................. 28
2. Performance Measurement .................................................................................. 31
3. Budget .................................................................................................................. 33
4. Laws and Regulations .......................................................................................... 34
C. ORGANIZATIONAL AND INDIVIDUAL GOALS ................................. 34
D. A PROPOSED INCENTIVE SYSTEM ......................................................... .37
V. SIMULATION MODEL ...................................................................................... 43
A. INTRODUCTION .................................................................................................. 43
B. SIMULATION MODEL ................................................................................ 43
1. Problem Statement ............................................................................................... 43
2. Model ................................................................................................................... 44
3. Analysis ...................................................................................... 47
C. POTENTIAL IMP ACTS OF AN INCENTIVE SYSTEM .................................... 55
v
VI. CONCLUSIONS AND RECOMMENDATIONS ............................................. 58
A. IDENTIFICATION OF AN ALTERNATIVE INCENTIVE SYSTEM ............... 58
B. INCENTIVE SYSTEM IMPLEMENTATION RECOMMENDATIONS ............ 61
C. CONCLUDING COMMENTS .............................................................................. 62
LIST OF REFERENCES ...................................................................... 63
INITIAL DISTRIBUTION LIST ............................................................. 65
vi
ACKNOWLEDGEMENT
I would like to thank Prof. Keebom Kang and Prof. Bill Gates for their guidance
and patience. I also want to thank my wife, Aysegul Ozdemir, for her support during the
work in performing this research.
vii
I. INTRODUCTION
A. BACKGROUND
The Turkish Navy has four shipyards employing a wide range of personnel,
including officers (managers), military and civilian engineers, and civilian workers.
Collectively, these individuals are responsible for building new ships and performing
overhaul and intermediate level maintenance. Collectively, the greatest amount of the
time and effort is spent for overhaul maintenance at the shipyards. Depending on their
type, the ships receive overhaul maintenance every three or four years.
Since the overhaul cycles consume a largest amount of manpower and time at the
shipyards, the greatest number of problems occurs at this stage. The primary problem is
long cycle time during the overhaul maintenance-- almost none of the ships can receive
overhaul maintenance within the scheduled period. Because the cycle time for each ship
is very long, the actual overhaul maintenance cost often exceeds the budget. Another
significant impact of a long overhaul cycle time is low readiness. Since almost none of
the ships complete overhaul maintenance on time, the readiness of the Navy decreases.
To further exacerbate the situation, the productivity and the quality of work at the
shipyards are very low, and the shipyard personnel are always behind schedule. One of
the most important causes of this low productivity is that there is almost no incentive, to
motivate personnel to work efficiently. In this working environment, personnel are
reluctant to take responsibility for their work, and appear to take no pride in or ownership
their work. The personnel, mostly civilian workers, are typically unaware of or ignorant
of the impact of a long cycle time.
1
B. OBJECTIVES
The objective of this thesis is to determine the feasibility of implementing an
incentive system to help increase productivity and readiness, and decrease cycle time and
cost under certain constraints.
C. RESEARCH QUESTIONS
1. Primary Research Question
How will the Turkish Naval Shipyards manage the implementation of an
alternative incentive system within their existing structures?
2. Secondary Research Questions
a. What is the current level of productivity at the Turkish Naval Shipyards?
b. What are the major existing problems at the Turkish Naval Shipyards?
c. What compensation system is currently being used?
d. What alternative incentive systems are feasible to implement at the
Turkish Naval Shipyards?
e. What are the constraints of the alternative incentive systems within the
context of the existing work structure?
f. What are the potential impacts of alternative incentive systems on quality
and productivity?
2
D. SCOPE AND METHODOLOGY
The scope of research will be limited to examining existing compensation and
work systems, with a subsequent analysis of and recommendation for alternative
incentive systems and their implementation.
The data for this thesis were collected via e-mails and phone calls from the
Turkish Navy Headquarters and Turkish Naval Shipyards.
The methodology used in this thesis research will consist of the following steps:
1. Conduct a literature review ofbooks, magazine articles, and other library
resources.
2. Conduct a through review of the current structure and routine overhaul
maintenance processes.
3. Examine the current level of productivity.
4. Review the current compensation system.
5. Review alternative incentive systems.
6. Determine constraints for alternative incentive systems.
7. Build a simulation model using Arena simulation software.
8. Evaluate the potential impacts of a new incentive system on productivity.
9. Recommend a proposed incentive system.
3
E. ORGANIZATION OF STUDY
Chapter II reviews the current work system and compensation structure at the
Turkish Naval Shipyards. The current productivity and the existing problems are also
defined in this chapter.
Chapter m reviews alternative incentive systems and discusses their
disadvantages and advantages. This chapter also discusses potential impacts on quality
and productivity of these alternative incentive systems.
Chapter IV discusses the applicability of alternative incentive systems to a
government organization. The chapter examines the structural and statuary constraints of
the alternative incentive systems.
Chapter V builds a simulation model of the overhaul maintenance process using
Arena simulation software. Chapter V also includes the results of the simulation model,
which is used to review potential impacts of an incentive system at the Turkish Naval
Shipyards.
Chapter VI recommends an incentive system for implementation at the Turkish
Naval Shipyards. Chapter VI summarizes the findings of the previous chapters, answers
the research questions, and provides implementation recommendations.
F. BENEFIT OF STUDY
This study will provide the information required to determine if a new incentive
system could improve productivity at the Turkish Naval Shipyards. The results of this
study can also be used as a model for other Turkish Naval organizations seeking to
implement an incentive system to improve their current productivity.
4
II. CURRENT WORK AND COMPENSATION SYSTEM
A. INTRODUCTION
This chapter provides an overview of the current work and compensation system
in place at Turkish Naval Shipyards. It also examines the levels of productivity and
existing problems with the current levels of productivity and the compensation system at
the shipyards.
B. CURRENT WORK SYSTEM
The mission of the Turkish Naval Shipyards is to provide affordable, timely, and
quality maintenance, to build new ships, to modernize existing Naval ships, to deactivate
old Naval ships, and perform emergency repairs on Naval ships.
Overhaul maintenance is the most critical, ongoing mission of the shipyards as
this process is periodically applied to all of the ships in the Turkish Navy. Since overhaul
maintenance consumes the greatest amount of time, money, and effort of all the tasks
conducted at the shipyards, its effect on the productivity of the shipyards is the most
significant. Therefore, the overhaul maintenance process will be reviewed to examine
current productivity.
1. Overhaul Maintenance Process
Every ship in the Turkish Navy receives overhaul maintenance every three or four
years, depending on the type of ship. Ships can be categorized as small, medium, and
large. The overhaul process is the same for each type, only the overhaul period changes
5
according to ship type. The overhaul maintenance steps start even before the ship enters
the shipyard and end when the ship becomes operational after the overhaul. Figure 1
shows the steps before/during/after the overhaul process for any type of ship.
1. Ship requisitions maintenance
2. Shipyard performs first inspection
3. Ship makes appropriate changes to requisitions
4. Shipyard performs second inspection
5. Overhaul maintenance process begins
6. Last inspection is conducted prior to the end of
overhaul
7. Overhaul maintenance process ends
8. Refresher training for the ship
9. Ship becomes operational available.
Figure 1. Overhaul Maintenance Steps
Extensive details for each step listed above are listed in various Naval
maintenance documents. These documents also give a timeline for each step indicating
how long each step should take. The shipyard personnel make a schedule according to
these documents before a ship enters the shipyard; both arrival and departure times of
each ship are determined prior to beginning the overhaul process. (An overhaul process is
supposed to take 10 months for large ships, eight months for medium ships, and six
6
months for small ships) During the overhaul process, both ship and shipyard personnel
must follow this schedule without any delay.
Within the shipyard, there is a facility for each specific job wherein all tasks are
carried out simultaneously and/or sequentially. These facilities are listed below in Figure
2. Each facility's process time is given and used in building the simulation model in
ChapterV.
• Engine Facility
• Dry-Dock
• Gun Facility
• Paint Facility
• Wooden Works Facility
• Navigation Equipment Facility
• Anchor Facility
• Electric Facility
• Electronic Facility
Figure 2. Facilities
2. Personnel
The shipyards are the only military organization in the Turkish Navy in which
military personnel work with a number of civilian personnel. The majority of the
employees in the shipyards are civilian workers. The number of personnel in each
shipyard is slightly different. Figure 3 shows the average number of personnel in each
shipyard.
7
Military Personnel Civilian Personnel
Officers/Non-com. 0£ 98 Engineers 25
Engineers 31 Workers 955
Total 194 Total 980
Figure 3. Average Personnel Numbers in Each Shipyard
As previously mentioned, there are 12 different facilities within the shipyards.
Within each facility, there is one officer, or facility head, who is responsible for every
activity and all personnel within that facility. There is also one officer for each ship type
who schedules the maintenance procedures performed on the ship. Some facilities have
non-commissioned officers who work as experts. Other officers and non-commissioned
officers work at the shipyard headquarters. Military and civilian engineers work together
at the ship design department. Civilians work as groups at the facilities according to their
expertise. For example, the engine facility has almost 150 civilian workers. Within the
engine facility, these workers form four different groups; removal, repair, check, and
installation. Each facility has a supervisor chosen by shipyard management from the
senior civilian workers. These workers supervise the repair work being done within their
facilities.
There is seniority among civilian workers as well as among military personneL
Within the current work system, there is a rigid, hierarchical relationship among
employees. During the overhaul maintenance process, all procedures must be
accomplished by following orders from the shipyard's existing chain of command. Ships
are also within this chain of command during the overhaul process.
8
During the overhaul process, the involvement of ship personnel is very limited.
Most of the time, the ship's personnel address administrative issues and perform routine
activities within the ship. The ship's personnel, as end users, can only advise on routine
maintenance issues
3. Productivity
The productivity of the shipyard depends on the productivity of each facility or
department. Each facility's specialized function can be considered as part of a chain
reaction for a ship during overhaul maintenance. Some of the facilities cannot start
specific jobs on the ship until the other facilities finish. For example, an engine facility
must wait until the pipe facility removes a pipe connection with the engine. During
overhaul maintenance, any delay in any facility affects the entire cycle time for a ship.
Even a short delay in a facility at the beginning of the overhaul process may become a
significant problem, because that short delay will snowball into longer delays as the
maintenance process continues.
In order for a ship to become "operationally available" after overhaul
maintenance, all facilities must finish their maintenance procedures on the ship. The most
critical factor in determining the shipyard's productivity is whether or not an overhaul
maintenance process for a ship is finished on schedule. Figure 4 provides the overall
impression of the shipyards' productivity by examining data from the last ten years. (In
Chapter V, the current productivity will be analyzed by building a simulation model.)
9
Year # of arrivals # of departuress as scheduled Percentage
1990 17 7 .41
1991 13 6 .61
1992 18 10 .55
1993 12 5 .41
1994 14 7 .50
1995 14 8 .57
1996 15 7 .46
1997 14 9 .64
1998 19 12 .63
1999 16 8 .50
AVG 15 7.9 .52
Figure 4. Productivity Ratios
The second column in the above figure shows the total number of all ships
arriving at the shipyards for overhaul maintenance. The third column shows the number
of ships that received the overhaul maintenance within the scheduled period. The ratio
column represents the shipyards' level of productivity that is expressed in terms of the
percentage of the overhauls on schedule. For the last ten years, the average level of
productivity has been slightly over fifty percent; this very low ratio is a factor that
decreases the readiness of the entire Navy. One out of every two ships cannot depart on
time from the shipyard after the overhaul process, which means that almost half of the
Naval ships cannot become operational at any time.
10
C. CURRENT COMPENSATION SYSTEM
Shipyards implement their compensation system following the regulations and
specifications outlined in the Navy Award Program. This award program addresses types
of awards, including which situation and to whom they should be given for all Naval
organizations. The purpose of this program is to improve Naval operations by increasing
productivity, and to recognize and motivate employees by bestowing performance and
incentive awards.
Within the shipyards, the existing compensation system has the following awards
and incentives:
• Early Promotion (officers only)
• Performance Awards
• Special Act Award
• Navy-Wide Honorary Awards
• Invention Award
Early promotion awards are available only for the officers who are in the last year
of Lieutenant rank. Within the entire Navy, the maximum number of officers getting this
award cannot exceed five. Every year, the records ofthe officers that are in their 14th
service year are reviewed, and the top five are selected by Navy Headquarters. Then,
these five officers get promoted one year earlier than their scheduled promotions.
Performance awards are given to the employees that perform better than others.
Special act awards are given to the employees that make an extraordinary contribution to
their organizations. Honorary awards are used to recognize an employee's overall value
11
to the organization. Invention awards are available for the employees who invent
something useful that was not invented before. All these awards mentioned in this
paragraph take the form of recognition.
The current compensation system is very limited. The reality is that the awards
listed above exist primarily in names. Some of them are virtually impossible to get, and
others are superficially implemented. For example, it is extremely difficult for an officer
to get promoted before the standard number of years of service, because of the limitations
of this award mentioned above. Therefore, this promotion incentive is an unrealistic goal
for most of the officers, and this incentive has no effect in increasing productivity.
Another example is that the "Employee of the Month" award, given as a performance
award. This award should be given according to employee performance, but in reality, it
is given according to the employee's turn. Under these circumstances, every employee
knows that he will be given the award, and when. In summary, it appears that there is
little evidence to support the success of the current incentive system. No specific strategy
currently exists that appears to motivate or enhance employee productivity.
12
III. LITERATURE REVIEW OF INCENTIVE SYSTEMS AND INCENTIVES
A. INCENTIVE SYSTEMS
The word "incentive" comes from Latin, incentiuus, that means, "setting the
tune." An incentive is something that influences people to act in certain ways. An
incentive system is a collection of incentives and a set of procedures for using them.
Organizations use incentive systems to motivate their employees to work more efficiently
and to maximize the employee's potential. The use of incentives by business
organizations to encourage workers and reward excellence is becoming increasingly
popular. Incentive compensation can take the form of non-monetary or monetary
incentives. This chapter focuses on the use of both monetary and non-monetary
incentives.
In today' s environment, it is becoming harder to find the talent needed for a
company to be effective and efficient. From a performance perspective, the ultimate
objective should be to create a workplace environment that is filled with rewards and
recognition to achieve results that make a difference in productivity. In striving to create
such an environment, re-evaluating incentive systems becomes very important. In order
to stay on the cutting edge of progress and productivity, organizations have to re-think
standard incentive systems and try to envision the incentive system as a product--a
product for the internal customer, the employee.
The objective of incentive systems is improving individual and organizational
performance. An employee who meets performance expectations is eligible for
recognition through an incentive system that includes monetary awards, bonuses and/or
13
non-monetary awards. Incentives can be used strategically to encourage achieving
specific productivity, performance, and production goals. Eighty nine percent of
American workers think their organizations would perform better if employees were
given meaningful incentives to improve quality and productivity. (Nelson, 1996)
In the past, many incentive systems were developed and implemented based on
environmental conditions, organizational and individual goals and needs. Currently, there
are a wide variety of incentive systems in use. These incentive systems vary by design
and fall into three main categories: (1) organizational incentives, (2) group incentives,
and (3) individual incentives. There are monetary and non-monetary incentives within
each of these categories.
1. Individual Incentive Systems
Incentive systems focus on either individuals or groups. Individual incentive
systems try to reward individual performance. Individual incentives set performance
objectives for specific jobs and reward the achievement of the goals. Individual incentive
plans fall into three broad categories, depending on the type of employees included and
the measurement criteria used: piecework plans that reward output in excess of a
standard; multiple individual criteria plans, which include both quantitatively measurable
and qualitatively evaluated performance; and plans with both organizational standards
and individual goals. (Peck and Parkinson, 1995).
Individual incentive plans should have strategic objectives such as productivity,
cultural, and compensation objectives. Productivity objectives involve achieving
measurable specific goals, greater customer satisfaction, and improved quality of the
14
product or service. Cultural objectives are related to the personality of the organization
rather than a concrete outcome, and are thus the least often mentioned. Compensation
objectives include goals such as reducing compensation costs by transitioning from fixed
to variable wages and salaries that are closely linked to employee performance. These
objectives are not directly included into performance criteria the way, for example,
productivity objectives are. Rather, they are often a result of the effective functio-ning of
the incentive plan.
There has recently been some decline in the use of individual incentive plans
because of the trend to adopt group plans. One such area is information processing by
administrative, clerical, and technical employees, since performance measures for these
operations are becoming more common. (Peck and Parkinson, 1995).
One of the greatest benefits of individual incentive plans is that an employer can
reward superior performance without having to increase base salary or change the amount
contributed by the organization to benefit plans. The individual award must be "re
eamed" every year, unlike base pay increases that are permanent.
Figure 5 below lists the pros and cons to individual incentive plans. The left hand
side of the figure indicates the potential benefits in performance, effectiveness, and
productivity. The right hand side of the figure lists possible disadvantages of the
individual incentive plans.
15
Potential Benefits Possible Drawbacks
- Increased Productivity - Lower Product Quality
- Lower Production Costs - Higher Implementation and
- Less Direct Supervision Administrative Costs
- More Effective Use of Equipment - Supervisory Suggestions May Be Seen as
- Entrepreneurial behavior Is Distractions
Reinforced - May Increase the Risk of Accidents
- Motivates Higher Performance - May Not Account for Interrelated
- Variable Instead ofFixed Behavior
- Individuals Better Understand How - Standards May Be Set Too High
Their Performance Is Linked to - There May Not Be Any Payment and
Objectives Morale Will Suffer
- Distinguishes Between Performers - Workers May Oppose Changes in
- Focus on the Person, Not the Job Production Scheduling
- Disparities in Pay May Cause Jealousy
and Lower Morale
- Potential for Rate Bias in Performance
Evaluation
Figure 5. Individual Incentive Programs Pros and Cons (Peck, 1995)
If any organization is determined to be amenable to individual incentives, there
are certain decisions to be made and steps to be taken. These decisions and steps include:
Deciding which employees are to be included;
Devising performance objectives to be achieved by participating
employees;
Devising criteria for assessing the achievement of the objectives;
Deciding on the life of the plan;
16
Deciding what training is needed for participants and administrators;
Determining what changes, if any, need to be made in the existing pay
system; and
Evaluating and making any necessary changes to the
administrative/reporting systems that will support the program.
2. Group Incentive Systems
Groups are defined as teams of individuals who work together to develop
products or deliver services for which they are mutually accountable. In the individual
incentive systems, employees are compensated based on their individual performance,
whereas in the group incentive systems employees are evaluated based on how their
teams perform. Group incentive systems are a means of rewarding performance in team
settings. Performance measurements for groups include: historical output estimates,
forward performance goals, or aggregated task standards. (Chingos, 1995)
There are various forms of group incentive systems currently being used in
organizations. There is no template that can be placed in an organization to easily
determine the most appropriate type of incentive system to implement. (Flynn, 1995)
There are many factors, such as strategy and culture, that are different in every
organization. Ultimately, the group incentive systems fall into three categories: a
proportion of the individual's base pay, other monetary rewards such as gain-sharing, and
non-monetary rewards such as recognition and praise.
There are many factors an organization must consider before implementing any
kind of group incentive system. For example, do the prerequisites exist for an effective
17
teaming environment that will create a strong foundation for implementing a group
incentive system? Such prerequisites include, but are not limited to: interdependent jobs;
accurate and objective measures of the team's performance; management support for
teams, the organizational culture emphasizes cooperation among the team members at all
levels; effective communication skills and flexible communication channels between
managers and employees.
The move to group incentives affects employees in different ways. In a study
conducted by Honeywell, Dickinson, and Poling (1997), both a group and individual
incentive system were used in an experiment with 20 undergraduate psychology students.
Those in the individual incentive condition earned more than those in the group
condition. It was concluded that under a group incentive system, top performers decrease
their performance when their earnings are reduced by poor performers. Poor performers
continue to perform below average, because they can take advantage ofthe performance
of other members.
In another study, conducted by Welboume and Cable (1995), individuals stated
that if companies stress the organizational role of the employee, then the employee would
view their incentives as entitlements based upon that membership role. This situation will
de-emphasize the "personal" role wherein the employee thinks only about himself and
not about the organization as a whole; this helps the organization increase the employee's
level of commitment.
Figure 6 summarizes advantages and disadvantages ofthe group incentive
systems.
18
Advantages Disadvantages
• Motivates coordination of workforce • Top performers may decrease
• Encourages teamwork their performance
• Easier than individual systems in • Poor performers may perform
implementation below average
• Less costly than individual systems • Large teams suffer from
• Increases cooperation between communication difficulties
employees and management • It is too hard to build teams
• Increases amount of communication properly
within the organization
• Increases flexibility between employees
and management
Figure 6. Advantages and Disadvantages of Group Incentive Systems
3. Organizational Incentive Systems
An organizational incentive system is one in which the individual's incentive
depends on the organization's overall performance. Organizational incentive systems are
a category of group incentive systems. In general, organizational incentive systems are
designed to encourage employees to either improve performance or contribute ideas on
how to improve operations. The basic rationale behind these type of systems is that the
level of productivity is a cumulative result of the entire workforce, (including support
personnel such as the material handler and the janitor), and not just the production
worker. (Welbourne and Cable, 1995)
19
Types of organizational incentive systems include Scanlon, Rucker, and gain
sharing or profit sharing. (Ezzamel and Wilmot, 1998) All are similar in that they try to
increase productivity by using different methods. Scanlon systems measure gains on sales
dollars compared to labor costs. Rucker systems measure the value-added in
manufacturing compared to labor cost. Gain sharing and profit sharing are team-based
pay systems that provide an explicit link between business performance and team reward.
(Patton and Daley, 1998)
The organizational incentive systems can be installed within a short period of time
since they are simple and inexpensive to install and maintain. Therefore, these systems
can have an immediate impact on performance. Another advantage of the organizational
incentive systems is that all employees are directly or indirectly included. (Pelletier and
Rahim, 1993)
The major disadvantage of the organizational incentive systems is that there may
be low motivation at the individual level; an individual or group can fmd himself or
herself performing very well but rewarded very little depending on how the rewards are
calculated. (Pelletier and Rahim, 1993)
B. MONETARY INCENTIVES
A monetary incentive uses cash rewards to induce the desired behavior or results.
The two main objectives of monetary incentives are: (1) improvement of the productivity,
efficiency, and effectiveness of the organization, and (2) enhancement of employee job
. satisfaction. From a motivational standpoint, there are two kinds of compensation within
monetary incentives: fixed pay and variable pay.
20
Fixed pay gets its name because it seldom changes more than once a year, and
typically those increases are relatively small. Almost all government employees are paid
with fixed pay. Its effect on job performance is somewhere between marginal and
nonexistent. According to (Gellerman, 1992), "hardly anyone pumps extra time, effort, or
imagination into his work just to get the same check every payday."
Variable pay is paid out in varying amounts, and can be quite substantial relative
to fixed pay. Variable pay is defined as compensation other than base wage or salary that
is awarded on the basis of a specific standard of performance. (Gellerman, 1992)
Variable pay does not encompass cost of living increases, fails to recognize changes in
the purchasing power of money to any reasonable extent, and has little or no motivating
power of its own. The 10 major forms of variable pay presently used are (Peck and
Parkinson):
• Current Profit Sharing: Uniform payment to all or most employees based
on an organizational profitability formula.
• Gain-sharing: Plans designed to measure the productivity of a group, unit,
or organization, and to share the value of productivity gains uniformly
with all participants. • Individual Incentive: Payment based on a standard of individual
performance. • Instant Incentive: Special payment to an individual for a noteworthy
achievement. • Merit Bonus: Payment based on individual performance appraisal given in
lieu of, or in addition to, a merit increase and never added to base salary.
• Organization-wide Incentive: Variable payment based on a measure of
organizational performance.
• Pay-For-Knowledge: Pay increase based on the number of skills or jobs
mastered. • Restricted Stock/Stock Option: Grants to non-executives of stock subject
to restrictions or options to purchase stocks.
• Small Group Incentive: Uniform award to all members of a group, based
on their achievement of predetermined objective.
• Two-Tier Pay: New hires (second tier) in a particular occupation are paid
on a lower scale than previous hires.
21
Monetary incentives are becoming "rights" rather than rewards. The increasing
demand for material rewards is rapidly destroying their usefulness as incentives and
managerial tools. (Nelson, 1995) Monetary incentives have in some cases been found to
have a demotivating effect. Monetary incentives can reduce teamwork as employees
concentrate primarily on individual cash gains. Some organizations pointed out a
negative boomerang effect, while others reported ongoing problems with timely response
and noted disagreements on determining dollar amounts.
While there are ways to motivate employees using money, much of the money
spent on motivation is wasted, because there is little knowledge about what money can
and cannot do. There is a limit on how much people are willing to give up just to make
more money-particularly if the extra money is a relatively small amount. To motivate
people with money, you may have to offer them a lot of money. However, many times a
company must spend a great deal of money in exchange for a small increase in effort-a
rather uneconomical proposition for the "motivator."
The employees earn their living by selling their time and effort, but not all of their
time and effort is for sale. Most individuals want to reserve some of their time and energy
for their own endeavors. If a company wants to buy additional time and effort from its
employees, it comes down to a question of price. The time and effort not already sold will
cost more than the time and effort they have sold. The employees might be willing to
sacrifice their extra time and effort just for enough money. So if you use nothing but
money to buy employees' unsold time, the arrangement will quickly become so expensive
that no company could afford to keep up with the rising cost of this type of system.
(Gellerman, 1992)
22
C. NON-MONETARY INCENTIVES
A reward is not just about money- a reward can also include non-monetary
returns that promote motivation. Non-monetary incentives are personal and flexible, and
thus can be more widely used. They can have greater impact in motivating more people
and in helping to reinforce organizational structure. With relatively little effort and
expense, management can obtain the benefits of non-monetary incentives that help
employees increase their performance and productivity.
The current value of non-monetary rewards as employee motivators is increasing
for two reasons. First, traditional rewards are becoming less and less effective in
motivating today's employees to achieve high performance. Second, non-monetary
rewards are effective and highly desired by today's employees. (Nelson, 1996)
The most effective motivators for employees are often such intangibles as being
appreciated for the work they have done, being kept informed about things that affect
them, and having a sympathetic manager who takes time to listen to them. (Nelson, 1996)
None of these intangibles are very costly.
Studies conducted in the incentive area have shown that one can obtain a greater
increase in productivity through the use of non-monetary incentives. In a study of
manufacturing team motivators, more than half of the manufacturers say incentive
systems work best when they include non-monetary incentives such as recognition
programs, training and development, and changes to work content. (McKenzie and Lee,
1998) Many other studies have shown that employees find the most meaningful
incentives to be things that are free, such as a personal thank-you from one's manager for
doing a good job.
23
Although non-monetary incentives are given little or no attention in management
literature and practice, they are very effective. In a recent survey of American workers,
63% of the respondents ranked "a pat on the back," as a meaningful incentive.
(Mischnick, 1998) In another recent study of 65 potential incentives, four out of the top
five incentives that employees ranked as the most successful motivators were (a) initiated
by their managers, (b) based upon performance, and (c) required little or no money, (e.g.,
letters of congratulations to the employees, personal notes for good performance,
recognition, and morale-building meetings). (Nelson, 1996)
Employee recognition is a very effective and feasible way in which a non-
monetary incentive can be implemented, especially within government organizations.
(Nelson, 1996) Some of the most effective forms of recognition cost nothing at all. A
sincere word of thanks from the right person at the right time can mean more to an
employee than a raise, a monetary award or a whole wall of certificates or plaques. Part
of the power of such incentives comes from the knowledge that someone took the time to
notice the achievement, seek out the employee responsible, and personally deliver praise
in a timely manner. (Nelson, 1996)
Peters, T. and Waterman, R. (1982) report the wealth of non-monetary incentives
used by the companies which they studied:
At Foxboro, a technical advance was desperately needed for survival in the
company's early days. Late one evening, a scientist rushed into the president's
office with a working prototype. Dumbfounded at a elegance of the solution and
bemused about how to reward it, the president bent forward in his chair,
rummaged through most of the drawers in his desk, found something, leaned over
the desk to the scientist, and said, "Here!" In his hand was a banana, the only
reward he could immediately put his hands on. From that point on, the small
"gold banana "pin has been the largest accolade for scientific achievement at
Foxboro.
24
Non-monetary incentives are most effective when a few simple guidelines are
followed. Non-monetary incentives need to:
• Clearly reward the specific, desired behavior. The incentive needs to be
given in response to the desired behavior.
• Immediate. Non-monetary incentives need to be given as soon as possible
after the desired behavior occurs.
• Delivered personally. Part of the power of non-monetary incentives from
the way they are personally delivered.
• Valued by the individual. A final guideline for making non-monetary
incentives effective is to be sure they are valued and meaningful to the
individuals who receive them.
D. CHARACTERISTICS OF AN EFFECTIVE INCENTIVE SYSTEM
No perfect incentive system exists, not within any organization or within any
economy. However, there is likely an appropriate combination of incentive systems for
both private and public organizations.
A true incentive system implies potentially unlimited rewards for success and a
genuine penalty for failure. An incentive system should also extend the time horizon for
decision-making, and encourage good performers to stay and poor ones to leave.
As mentioned above, there is no guarantee that every incentive system will be
successful. However, understanding and applying the following key points can enhance
the probability ofbuilding an effective incentive system. (Homestay, 1996)
25
• Incentive systems focus on the desired behaviors and provide the
performer with a direct connection between action and the result.
• Incentive systems should be meaningful. The value ofthe reward is worth
the effort to both performer and organization.
• The incentives should be provided as timely as necessary to reinforce the
desired behaviors that achieve desired results.
• The incentives should be provided contingent on taking an action or
achieving a result.
• The system should be simple to understand. If the system needs to be
complex, the organization should provide ongoing training for its
employees.
• Incentive systems should be built upon past programs. A company should
build upon and learn from the previous incentive program to launch a
successful follow-up program.
• The managers need to be highly motivated to maintain the incentive
system being used within their organizations.
• Incentive systems need to have a positive impact on behavior.
• Incentive systems need to focus efforts on serving the customer.
• Incentive systems need to enhance collaboration within the workplace.
• In situations where unions are representing employees, they should be
included in the process of implementing incentive systems to guarantee
coordination.
• Incentive systems should be continuously maintained.
26
IV. DIFFICULTIES IN IMPLEMENTING INCENTIVE SYSTEMS AND A
PROPOSED INCENTIVE SYSTEM
A. INTRODUCTION
Chapter III reviewed incentives and incentive systems currently used in both
private and public sectors. This chapter examines the applicability of these systems to the
Turkish Naval Shipyards under the existing constraints. This chapter also proposes a
viable incentive system for the shipyards.
B. APPLICABILITY OF THE INCENTIVE SYSTEMS
The private sector uses the incentive systems reviewed in the previous chapter to
increase profit by increasing productivity. Any organization wishing to reduce labor cost,
cycle time, waste and inefficiency, and increase quality and performance is looking to
improve productivity. Any organization may benefit if it can properly implement an
incentive system. Although the Turkish Naval Shipyards are not intended to generate a
profit, they are supposed to maximize efficiency in using tax money or minimize cost by
increasing their productivity.
Since the shipyards are government owned facilities, it is not as simple as it is for
the private sector to implement an incentive system. Therefore, the implementation of an
incentive system is likely to face a number of barriers that may complicate or prevent
attempts to install an incentive system. Nevertheless, implementing a feasible incentive
system under the existing constraints may be a strong support mechanism for the
shipyards to increase employee productivity and maximize efficiency in using tax money.
27
1. Culture
Culture includes traditions, values, attitudes, shared memories, and just about any
common characteristic that unites a group. We have to take into account the conditions
under which incentive systems are made available to members. Since culture is the most
important factor that influences the most effective types of incentives, we cannot ignore
cultural factors while choosing a feasible incentive system for the Turkish Naval
Shipyards.
The work environment of the shipyard personnel, both managers and civilian
workers, has remained constant and relatively unchanged since its inception. Almost
everybody looks forward to ending the workday as soon as possible after finishing his
daily schedule. Therefore, the personnel do not want changes that affect their daily lives
in the shipyard.
There is a traditional management and work system in place at the shipyard. Of
course, technological changes take place within the shipyards. The personnel can easily
adapt to these changes with the help of additional training and education. These changes
only affect the way of completing the tasks themselves-- they do not affect the behaviors,
attitudes, or the relationships of the employees. On the contrary, a new incentive system
would mean changes at every level of shipyard. A new incentive system would be a big
change, because the current compensation system has only superficial incentives: The
employees know how the current system works and believe that the existence of an
incentive system does not make any difference in their routine work life because of its
weak implementation. Yet, the implementation of an alternative incentive system would
28
be totally different from the current one. The work environment, all routine processes,
relationships, managers, employees, and customers (ship personnel) would be affected.
Before implementing a new incentive system, one must convince people of the
importance, benefits, and feasibility of the system. To get satisfactory results from the
system, each individual should understand the rationale for the proposed change. Thus,
within the existing environment, it may take a long time to change existing attitudes and
behaviors.
In the shipyards, most of the labor is performed at lower levels. The officers who
are responsible for supervising the workers at these levels do not have flexibility in
managing their employees or the power to make changes or strategic decisions. The
management believes that officers hold exclusive responsibility for completing every job
in the shipyard. Typically, given the potential consequences of deviating from one's
assigned mission, these officers are not willing to take risks-- they merely struggle to
ensure that all tasks are completed without considering critical factors such as worker
productivity, quality, and time. The civilian workers do not take responsibility even for
their own jobs, because they are aware that their managers will be blamed if something
goes wrong.
The implementation of an incentive system requires managers at all levels to
evaluate the productivity and performance of the employees. Within the naval shipyard
context, the managers are not interested in productivity and performance of their
employees. They have only enough power and time to make sure that the jobs are done
under that much responsibility with little empowerment
29
Some of the managers and senior civilian workers have the propensity to "own"
any job well done by the workers under their supervision. These people are always
jealous of the other workers who report to them. They do not allow the high-achieving
performers to show their successes to the management. Therefore, to some extent,
workers under these kinds of managers cannot find any reason to perform well. Then,
good performers become bad performers, and bad performers continue to perform badly.
It is virtually impossible to reward the outstanding workers properly because oftheir
managers' reluctance to share in the formal recognition of such individuals.
The compensation systems of the officers and the civilian workers are different,
and there is a dilemma about the amount of these two payments. Even though the officers
are managers to whom the civilian workers report, they make less money than the civilian
workers. Most of the officers think that the civilian workers are already adequately
rewarded. These officers may believe that a new incentive system should be implemented
just for the officers, or ask for some extra monetary incentives that can make their
salaries at least equal to the workers' salaries. There is a common idea among the officers
that it would not be fair to reward their employees, particularly since the officers are
making less money than these employees.
Relationships between managers and the employees are not always as
professional as they should be. There may be some managers who give their employees
preferential treatment because of their mutual interests. Nobody can say that these kinds
of managers evaluate their employees' productivity and performance objectively. Under
such a condition, some employees may be rewarded even though they do not deserve
30
such recognition, or some of them may be ignored despite their superior performance.
These effects are likely to cause conflicts among the employees.
The personnel's emphasis on the value of time is very weak-- the concept of
"time is money" does not apply in the shipyards. Generally, personnel ignore the price of
poor time management. There are few people who use their time effectively. Working
always behind schedule has become the social norm within the shipyards. This is one of
the most critical cultural barriers that one may encounter in implementing an incentive
system. Therefore, the feasible incentive system should be powerful enough to
successfully address the current "laid back" philosophy so that workers can begin to reach
the desired productivity levels.
2. Performance Measurement
Kerr (1975) emphasizes the need to reward performance based on objective
criteria that reflect the mission of the organization. He also indicates that a misdirected
incentive system cannot improve performance in desired areas. Additionally,
performance in public agencies can be more difficult to measure than in some private
sector organizations. (Milakovich, 1995) The performance measurement in the private
sector is often related to profits or financial ratios. Since the Turkish Naval Shipyards do
not operate on a profit basis, it is difficult to clearly define desirable performance.
In order to fairly evaluate the performance of individuals and groups, the
shipyards' mission has to be made crystal clear to every individual. Every employee must
understand the mission and objectives of the shipyard, the employee's own mission, and
the manager's vision of the desired performance. Once these prerequisites have been
31
established, the managers can evaluate their employees' performance. The shipyard
management's policy about establishing and clarifying missions, objectives, and desired
performance is somewhat weak, because the management does not consider these issues
as important as they should be.
The level of customer satisfaction is a good indication of performance.
Customers, in this case the ship personnel, play an important role in recognizing
employee performance. They are the ones who will use all ship systems on which the
shipyard personnel work. Customers are in the best position to say which employees are
good performers, and which employees are not. The ship personnellmow who is
responsible for what repair work during the overhaul process. Currently, the role and
participation of ship personnel is almost non-existent during the overhaul maintenance
period. An effective incentive system would require the ship personnel to be involved to
the greatest extent possible.
Feedback is a critical element in implementing an incentive system. Without
feedback, it is impossible for an individual to calibrate his or her performance. Feedback
has also been judged as essential for learning, directing actions, growth, shaping attitudes,
and motivating.employees. (Glinow and Sethia, 1983) The extent to which an
organization can increase the usability of employee feedback is contingent upon giving
the evaluators appropriate information about the employees' expected and actual
performance.
In the shipyards, the immediate senior officers and the managers should be
responsible for the performance evaluation. The hierarchical superior may lack the
competence, time, or ability to observe performance. When that happens, the hierarchical
32
superior may not have a valid, credible, or trustworthy basis for evaluation. (Glinow,
1988)
3. Budget
Where incentive systems are contingent upon appropriating funds, potential
barriers will include additional factors affecting the implementation of the incentive
program. Unlike other types of incentives, monetary incentives by nature require that
special funds be made available for rewarding employees. (Greiner, 1978)
Military budgets do not change within the fiscal year after receiving formal
approval. There may be two kinds of change in the next year's budget. First, the
government can increase next year's budget according to the inflation rate. Second, if any
military organization is successful in improving productivity and saving money, the
savings may not be recycled back into that specific organization's budget. Saving this
year could lead to future budget cuts for those organizations. This "punishment" may
discourage shipyard management from implementing an incentive system.
Like the other military organizations, the shipyards do not have any funds within
their budgets, to finance an incentive system. Since the government (not the shipyards),
pays the salaries of both officers and civilian employees, there is not any appropriated
money, to pay the employees as an incentive.
33
4. Laws and Regulations
When incentives require special appropriations, legal constraints built into the
appropriation laws must be considered. The Turkish Government has laws, not only for
the military but for all government organizations, which prohibit military organizations .
from giving employees any cash rewards except for regular wages and salaries.
There is a law that regulates salary increases for military personnel. There are two
increases in salaries within a year, depending on the inflation rate. This law does not
allow the government to give military personnel any incentive payment other than their
original salaries.
The shipyard civilian employees have their own unions, and there are also laws
that regulate their salaries. Civilian employees' salary increases are determined through
negotiations that are held once a year between the government and the unions. These
increases are always higher than the increases in the military personnel's salaries. As
mentioned earlier, the difference between these two salaries may create a conflict
between military and civilian personnel within the shipyards while implementing an
incentive system.
C. ORGANIZATIONAL AND INDIVIDUAL GOALS
The organizational goal of the Turkish Naval Shipyards in implementing an
alternative incentive program is to increase quality and productivity. A secondary goal is
to successfully integrate the program under the existing constraints explained above and
to identify necessary modifications to the policies and practices within the shipyards.
34
With these organizational goals in mind, the foundation for an alternative incentive
system can be developed.
The incentive system must be framed around a set of core assumptions that
emphasize the linkage between people and organizations. (Simons, 1995) People are an
organization's most important resource. The performance of an organization depends on
how it recruits, hires, trains, and retains people and promotes effective performance of its
people. (Simons, 1995)
The process for selecting an alternative incentive system must be based on the
desired outcomes ofthe incentive system and alignment of individuals with the Turkish
Naval Shipyards' organizational goals. The task of aligning performance measurement
criteria with reward criteria is a challenging one that requires focus and continual
measurement. (Stone and Gerard, 1997)
First of all, we must determine and prioritize individual goals to align individual
and organizational goals. Jurkiewicz, Massey and Brown (1998) identified the following
15 "wants" for both public and private sector employees.
1. A stable and secure future 2. A chance to learn new things 3. A chance to use one's special abilities 4. High salary 5. Opportunity for advancement 6. Variety in work assignments 7. Working as part of a team 8. Chances to make a contribution to important decisions 9. Friendly and congenial associates 10. A chance to benefit society 11. Chance to exercise leadership 12. Freedom from supervision 13. Freedom from pressures to conform both on and off the job 14. Chance to engage in satisfying leisure activities 15. High prestige and social status
35
A list containing the above "wants" was given to 296 public employees in a
variety of :fields, and they listed the items in order of priority. Private sector employees
ranked the same wants in a different order. For example, the top three private sector
employee "wants" in order were: a high salary, a chance to exercise leadership, and
opportunity for advancement. There are no matches among the top three wants in the
public and private sectors. This fact indicates that public sector employees may be
motivated differently than private sector employees; it also implies that using non
monetary incentives can be well suited for public sector employees.
The 15 items listed above provide a prioritized lists of objectives for an ideal
incentive system. All of these objectives are not valid, especially because of cultural
factors existing within the shipyards. Within the existing work environment and shipyard
cultural factors, some of these objectives can be met immediately using an incentive
system. They are listed below in Figure 7. Collectively, achieving these objectives can be
viewed as a goal for the shipyards. These goals are listed according to their priorities.
36
1. A stable and secure future
2. Freedom from supervision
3. Chance to use my special abilities
4. Chance to learn new things
5. High salary
6. Working as part of a team
7. Chance to make a contribution to important
decisions
Figure 7. Incentive System Direct Goals
The criteria listed above can be used to compare and contrast alternative incentive
systems, and thus evaluate the system's potential effectiveness. The most viable incentive
system may be the one that best meets the shipyards' organizational goals, as well as the
employees' goals.
D. A PROPOSED INCENTIVE SYSTEM
To identify a viable incentive system for the Turkish Naval Shipyards, the
existing constraints must be considered, and the incentive system most likely to meet
organizational and employee goals must be identified.
Monetary incentives are least likely to be used in the shipyards under the current
statutory limitations. Monetary incentives may only meet the criteria of a high salary.
37
Moreover, monetary incentives are limited due to the laws and regulations that limit the
government to (i) paying salaries to public sector employees, and (ii) increasing their
salaries once or twice a year. However, the increases in salaries for both military and
civilian personnel may surpass the inflation rate to help the employees afford the cost of
living. We may use these increases as monetary motivators within the incentive system to
increase productivity.
Accordingly, we have to emphasize non-monetary incentives, since most of the
constraints explained before are directly linked to the monetary incentives. Non-monetary
incentives can meet all of the direct goals except high salaries for shipyard employees.
Within the context of the Naval Shipyards, non-monetary incentives are the most feasible
incentives. There is no law or regulation that prohibits the shipyards from rewarding
employee performance with non-monetary incentives. An additional plus is that non
monetary incentives do not further increase the existing economic gap between the
military and civilian personnel.
Taking the cultural and financial issues into consideration, the positive effects of
an incentive program can be best achieved through non-monetary incentives. Non
monetary incentives can be motivating rewards and require little or no money. Current
surveys and studies indicate that employees prefer rewards, recognition, and praise to
money. (Nelson, 1996) The specific types of non-monetary incentives that can be used in
the shipyards will be listed in Chapter VI.
An organizational incentive system may require the least amount of effort and
time to implement, and can meet the shipyards' organizational goals. Organizational
plans recognize that the organization's success results from the effort of everyone
38
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involved, not just an individual or a group. However, organizational incentive systems
fail to address outstanding performance at the individual and group level. Within this
system, there are no opportunities to identify strong or weak performers. In the shipyards,
it is very difficult to develop a single organizational incentive system that affects all
employees equally.
Group incentive systems encourage employees to work as a team and provide
opportunities for individuals to exercise leadership. Working as a group may reduce the
need for direct supervision. In shipyards, almost all of the tasks require collaborative
efforts due to the nature of the jobs. Each facility within the shipyards carries out a
specific job for the ships. The workers in each facility complete repair works in groups.
For example, the gun facility has five groups: removal, repair, calibration, paint, and
installation. The· groups already exist within the facilities at the shipyards. It is much
easier and cheaper to implement a group incentive system within the current work
structure. Therefore, a group incentive system may be the most feasible for the shipyards.
A group incentive system would most likely have positive impacts on productivity and
quality of the shipyards.
An individual incentive system has the capacity to affect the following individual
goals: stable and secure future, the chance to learn new things, the chance to use special
abilities, variety in work assignments, the chance to make a contribution to important
decisions, and opportunity for advancement. Higher implementation costs, lower quality
of work, and the potential for an increased accident rate may be some drawbacks of an
individual incentive system. Because ofthe culture of shipyards and the difficulty of
standardizing performance measurement, an individual incentive system may not be the
39
best fit for the shipyards; however, it is more feasible than an organizational incentive
system.
The most viable incentive system for the Turkish Naval Shipyards would be a
group incentive system using mostly non-monetary incentives. Under this system,
individuals can be rewarded in addition to their group awards when they make
outstanding contributions that significantly increase group performance.
Currently, both private and public organizations have implemented group
incentive systems using non-monetary incentives within the United States. The following
paragraphs provide some of the research results, survey results and statistics about
organizations implementing incentive systems similar to the one proposed here.
There are examples of private organizations getting benefit from using non
monetary incentives. The impact that some companies have observed using non
monetary incentives to drive desired performance objectives, include (Nelson, 1996):
• An Amoco plant saved $18.8 million in two years using of recognition gift
programs.
• The Travel Related Services division of American Express attributed a 500
percent increase in net income over 11 years to recognition programs.
• American Airlines, using a points-for merchandise recognition program, was
able to purchase a new airplane with $50 million in savings from increases in
employee performance.
According to Nelson (1996), Robert Half International, the nation-wide staffing
firm, conducted a survey of why people leave their jobs and found the primary reason to
be a lack of praise and recognition.
40
Nelson (1996) describes other examples of non-monetary incentives within
different organizations, including:
• At the Honeywell Technology Center of Honeywell Inc., management implemented a team based recognition program called "The Winning Edge" for superior team peiformance. The program was a success in getting employees to pay extra attention in helping others with their needs, increasing the general morale and excitement of the work environment, and increasing productivity of the company.
• At AT&T Universal Card Services in Jacksonville, FL, they use the Word of Thanks award as one of more than 40 recognition and reward programs. It is a pad of colored paper shaped like a globe with "Thank You" written all over it in different languages. Anyone in the company can write a message of thanks to someone else and send it to that person. The program is extremely popular-in four years they have used over 130,000 such notes.
• ARA services headquartered in Philadelphia, PA, organizes a day of appreciation for worthy employees. They send out a proclamation announcing Bob Jones Day, for example, with the reason for the honor. The honoree enjoys all sorts offrills, such as computer banners and a free lunch.
• The Office of Personnel Management in Washington, DC, uses a "pass around" award that was first given to the division's "special peiformer." Later that person passed the award to another who, he believed, truly deserved it. The award came to take on great value and prestige because it came from one's peer. When the award is to be passed on, a ceremony and a lunch are planned.
Some public organizations also benefit from using non-monetary incentives to
improve productivity of organizations. United States Office of Personnel Management
Department (Federal Government's Human Resources Agency) researched about the
results of incentive systems being implemented within public organizations. Some of the
research results are:
• In 1995, the General Service Administration's (GSA) Realty Services
Division established a group incentive program that balanced individual and
41
team recognition. Currently, productivity has been high and teams are
providing assistance to one another in meeting the organizational goals.
• The Rock Island Arsenal, the largest government-owned weapons
manufacturing arsenal in the western world, has designed a group incentive
program that effectively balances team and individual recognition, and takes
advantage of non-monetary incentives. The arsenal improved its productivity
by 17 percent after implementing this incentive program.
• The Veterans Affairs Health Care Network in Upstate New York established a
recognition program that rewards individual and group behavior. This
program helped the Network achieve the following results: (1) the Network
exceeded its goal for reducing costs by 9.5 percent; (2) the Network increased
the number of veteran patients by 16 percent; (3) the Network generated
$107,650 in savings; ( 4) the Network improved its productivity by 20 percent.
The previous paragraphs provided examples of group incentive systems
successfully implemented within the United States using non-monetary incentives. At the
Turkish Naval Shipyards, the work environment and culture are not the same as these
organizations. Therefore, these examples may not necessarily prove that such an
incentive system will work at the Turkish Naval Shipyards. However, these successful
examples at least show that such an incentive system may work. We can suggest that a
group incentive system with non-monetary incentives, which works at some American
public and private organizations, might also work at the Turkish Naval Shipyards.
42
V. SIMULATION MODEL
B. INTRODUCTION
In this chapter, a simulation model of the overhaul maintenance process is built
using Arena simulation software. This chapter also analyzes the results of the tests
performed using the simulation model to review potential impacts of an incentive system
within the Turkish Naval Shipyards.
C. SIMULATION MODEL
1. Problem Statement
As stated in Chapter 1, there are three types of ships that receive overhaul
maintenance. When the ships arrive at the shipyard, the engines, guns, and anchors are
removed from the ships. Large ships have six engines, six guns, and two anchors.
Medium ships have four engines, four guns, and two anchors. Small ships have two
engines, three guns, and one anchor. After removal, engines, guns, and anchors are sent
to the engine, gun, and anchor facilities, respectively, for repair. Then, other facilities
(i.e., dry dock, wood work, electric, electronic, navigation, and paint) begin repairing the
ship. All facilities serve each type of ship simultaneously. When all repairs are complete,
the parts removed from the ships are re-installed, and finally the ships leave the shipyard.
Assumptions: The time between overhaul maintenance for each type of ship is:
48 months for large ships, 40 months for medium ships, and 36 months for small ships.
The removal and installation and drydock facility process times are assumed to follow
43
triangular distributions. The facility process times are assumed to follow uniform
distributions, and are provided for each type of ship in Figure 8 below.
Process times (months) Large Ships Medium Ships Small Ships
Removal TRIA (.5, 1, 1.2) TRIA (.3,.5,.8) TRIA (.25,.5,.75)
Installation TRIA (1,1.25,1.5) TRIA (.75,1,1.25) TRIA (.5,.8,1)
Engine Facility UNIF (3,5) UNIF (2,4) UNIF (1.5,3)
Gun Facility UNIF (2,3) UNIF (1.5,2) UNIF (.8,1.25)
Anchor Facility UNIF (1,1.5) UNIF (.75,1.25) UNIF (.5,1)
Drydock Facility TRIA (1.25,1.5,2) TRIA (.75,1,1.25) TRIA (.5,.75,1)
Woodenwork Facility UNIF (1,2) UNIF (.5,1.5) UN1F (.5,1)
Electric Facility UN1F (1.5,2.5) UNIF (1,1.5) UN1F (.75,1.25)
Electronic Facility UNIF (1.75,2) UNIF (1.25,1.75) UNIF (1,1.25)
Navigation Facility UNIF (1,1.5) UNIF (.75,1.25) UNIF (.75,1)
Paint Facility UNIF (.5,1) UNIF (.25,.75) UNIF (.25,.5)
Figure 8. Process Times
2. Model
The simulation model for the overhaul maintenance process is built using the data
given above. In this model, we used 14 different modules: Create, Delay, Assign,
Duplicate, Server, Batch, Store, Unstore, Match, Tally, Dispose, Variable, Expression,
and Simulate. A picture of the model is shown in Figure 9.
44
• ol:>o U1
~~reShlns e8wro: Sh1ps man ;;mps
Ill me
• lsimulat$ thesis model
Figure 9. Overhaul Maintenance Simulation Model
CTI::l
~
Phase 1:
At the beginning of the simulation model, three types of ships arrive at the
shipyard with different arrival rates. The ships are created using the Create module, and
the time between overhaul is defined in the Delay module. Then, the time of entrance to
the shipyard is recorded and operational availability for each type is calculated in the
Assign module.
Phase 2:
The removal time ofthe engines, guns, and anchors is defined within the Delay
module. When the engines, guns, and anchors are removed from the ships, these parts are
sent to the engine, gun, and anchor facilities by the Duplicate module. To be able to
identify which parts belong to which type of ships, these parts are hatched based on their
ship types using the Batch module.
Phase 3:
After completing these steps, other facilities (Drydock, Woodenwork, Electric,
Electronic, Navigation, and Paint) begin making repairs on the ships. All these facilities
are simulated with the Server module. The process times of the facilities for each type are
also defined in the server modules.
Phase 4:
After all facilities finish their designated tasks, the re-installation of the parts
removed from the ships is simulated using the Match module. This module matches the
ship with its respective parts. Again, the installation time is defined within the Delay
module.
46
Phase 5:
Finally, the Tally module collects statistics about the simulation. Since ships
receive overhaul maintenance periodically, the repaired ships are sent to the beginning of
the simulation to make a closed loop at the end of the model. The same processes
mentioned above are repeated over and over in the simulation model.
3. Analysis
When we run the simulation model, we get statistical results. These results are
average cycle times and operational availabilities for each type of ship, and average
queue times and utilization factors for each facility. Figure 10 shows these statistical
results.
47
ARENA Simulation Results Replication ended at time 600.0
TALLY VARIABLES
Identifier Average Half Width Minimum Maximum Observations
largeships cycletime 15.821 (Insuf) 8.8674 45.300 45
smallships cycletime 11. 602 (Insuf) 3.4779 20.878 37
Drydock_R_Q Queue Time .23010 (Insuf) .00000 4.8016 127
Gun R Q Queue Time 4. 5724 (Corr) .00000 33.383 559
Paint-R Q Queue Time .02595 (Insuf) .00000 .53523 126
Navigation R Q Queue T . 05783 (Insuf) .00000 .83195 126
Electric R-Q-Queue Tim .03367 (Insuf) .00000 .73779 126
mediumships cycletime 13.266 (Insuf) 6.0354 19.683 43
Anchor_R_Q Queue Time .46009 (Insuf) .00000 6.3145 217
Woodenwork R Q Queue T .00613 (Insuf) .00000 .28098 127 Electronic_R_Q Queue T .03460 (Insuf) .00000 . 67234 126
Engine_R_Q-Queue Time 9.5884 (Corr) .00000 42.087 518 DISCRETE-CHANGE VARIABLES
Identifier Average Half Width Minimum Maximum Final Value
OPAVMEDIUM . 69298 (Insuf) .00000 1.0000 .75000
Engine_R Available 1.0000 (Insuf) 1.0000 1. 0000 1. 0000
Anchor R Available 1. 0000 (Insuf) 1.0000 1.0000 1. 0000
Electric R Available 1. 0000 (Insuf) 1.0000 1.0000 1.0000
Navigation_R Available 1.0000 (Insuf) 1.0000 1.0000 1. 0000
Woodenwork R Available 1.0000 (Insuf) 1.0000 1. 0000 1. 0000
# in Navigation_R_Q .01214 (Insuf) .00000 2.0000 .00000
Drydock_R Busy . 21071 (Insuf) .00000 1.0000 .00000
# in Anchor R Q .16640 (Insuf) .00000 9.0000 .00000 # in Engine_R_Q 8. 3110 1. 6453 .00000 37.000 8.0000
Electric_R Busy .16856 (Insuf) .00000 1.0000 .00000
OPAVSMALL .70150 (Insuf) .00000 1.0000 1.0000
Electronic R Available 1. 0000 (Insuf) 1.0000 1. 0000 1.0000
Paint_R Busy .11621 (Insuf) .00000 1.0000 .00000
Engine_R Busy .93897 (Corr) .00000 1.0000 1.0000
Anchor_R Busy .18967 .03295 .00000 1.0000 1.0000
Navigation_R Busy .15135 (Insuf) .00000 1.0000 .00000
Woodenwork_R Busy .14731 (Insuf) .00000 1.0000 1.0000
OPAVLARGE .68203 (Insuf) .00000 1. 0000 .80000
Gun R Busy .76144 .08846 .00000 1.0000 1.0000
Electronic R Busy .14399 (Insuf) .00000 1.0000 .00000
# in Gun R-Q 4.2687 1.3497 .00000 31.000 4.0000
# in Paint-R Q .00545 (Insuf) .00000 1.0000 .00000
Paint_R Available 1.0000 (Insuf) 1.0000 1. 0000 1. 0000
Gun R Available 1.0000 (Insuf) 1.0000 1. 0000 1. 0000
# in woodenwork R Q .00130 (Insuf) .00000 1. 0000 .00000
Drydock_R Available 1. 0000 (Insuf) 1.0000 1. 0000 1.0000
# in Electric_R_Q .00707 (Insuf) .00000 1. 0000 .00000
# in Drydock R Q .04870 (Insuf) .00000 4.0000 .00000
# in Electronic_R_Q . 00727 (Insuf) .00000 2.0000 .00000
Figure 10. Simulation Summary Report
48
At the beginning of the simulation, five large ships, four medium ships, and three
small ships are created. We run the simulation model once for 600 months and the results
show that 45 large ships, 43 medium ships, and 37 small ships enter the maintenance
process during the simulation period.
We run the simulation model 20 times to get valid statistics for the ships. The
average cycle time and operational availability for each type of ship are shown in Figure
11.
Average Cycle Time Operational Availability
Replication Large Medium Small Large Medium Small
1 15.821 13.266 11.602 0.682 0.693 0.702
2 16.299 12.402 11.893 0.678 0.705 0.702
3 15.796 13.625 13.124 0.682 0.689 0.678
4 16.721 12.772 12.182 0.672 0.699 0.696
5 15.598 13.338 12.821 0.685 0.692 0.684
6 16.650 13.282 13.005 0.674 0.691 0.680
7 16.390 13.733 12.683 0.676 0.687 0.686
8 15.834 12.114 11.949 0.682 0.709 0.701
9 16.822 12.860 12.085 0.671 0.698 0.697
10 16.459 12.747 12.188 0.676 0.699 0.696
11 16.756 12.805 12.677 0.672 0.700 0.686
12 16.383 12.145 12.501 0.677 0.710 0.690
13 16.468 12.876 12.247 0.675 0.697 0.695
14 16.382 12.831 12.095 0.676 0.698 0.698
15 16.209 12.962 12.361 0.678 0.696 0.693
16 16.270 12.663 12.671 0.678 0.701 0.687
17 16.324 11.809 12.471 0.677 0.715 0.691
18 16.012 12.760 12.247 0.680 0.699 0.695
19 16.297 13.032 12.064 0.677 0.698 0.699
20 16.631 12.713 12.145 0.673 0.700 0.693
AVG 16.306 12.837 12.351 0.677 0.699 0.692
Std.Errors 0.0750 0.1051 0.0847 0.0008 0.0015 0.0015
Figure 11. Statistics for Ships
According to naval maintenance documents, the scheduled overhaul cycle time
for the large ships is approximately 10 months. In the simulation, the average overhaul
49
cycle time for large ships was 16 months within current productivity. The average
operational availability for large ships is sixty seven percent.
The scheduled cycle time for medium ships is eight months. The average
simulated overhaul cycle time for medium ships is 13 months, and the average
operational availability of medium ships is sixty nine percent.
The scheduled overhaul time for the small ships is six months. The simulated
overhaul cycle and operational availability for small ships are 12 months and sixty nine
percent, respectively.
The results of the simulation show that the actual overhaul maintenance process
for each type of ship takes almost five more months longer than scheduled process. The
simulated overhaul cycle times for each ship type are very close to actual cycle times
within current productivity at the shipyards. Practically, the overhaul process takes three
or four months longer than scheduled process for almost half of the ships within the
entire navy. Because of the long overhaul maintenance cycle times, the operational
availability of the ships would be low. The average operational availability of all ships is
shown in Figure 12.
50
r------------------------------------------ -------
1
0.8
> 0.6 ca c. 0 0.4
0.2
0
Operational Availability
oo en ,.... 00
Time
0 ..- N M V 10 CD 0 ..- N M V 10 CD -or- ~~'r"~T-'
Figure 12. Operational Availability
As shown in the graph above, the average operational availability of the ships is
approximately sixty nine percent, implying that thirty percent of the ships are not
operational at any time. Low operational availability causes low readiness. Therefore,
with the current productivity level, overall Navy readiness would also be low.
When a ship or any part of a ship arrives at any facility, it waits in the queue for
service. This queue waiting time makes the overhaul cycle time longer than standard
cycle time. The simulation model also calculates queue times of each facility based on
process times. These queue times are taken from the summary report and shown in Figure
13.
51
Average Queue Times
Replication Drydock Gun Electric Navigation Paint Electronic Wooden Anchor Engine
1 0.230 4.572 0.034 0.006 0.026 0.035 0.006 0.460 9.588
2 0.201 3.957 0.030 0.029 0.024 0.026 0.004 0.439 9.568
3 0.247 4.517 0.048 0.072 0.034 0.040 0.016 0.503 9.890
4 0.218 4.051 0.065 0.071 0.031 0.040 0.015 0.046 9.959
5 0.252 4.706 0.061 0.081 0.038 0.045 0.007 0.497 9.685
6 0.194 4.724 0.017 0.022 0.020 0.012 0.005. 0.455 10.155
7 0.234 4.841 0.037 0.035 0.026 0.026 0.007 0.468 10.180
8 0.205 4.163 0.033 0.028 O.Q15 0.025 0.009 0.436 9.262
9 0.212 4.259 0.029 0.040 0.026 0.028 0.008 0.445 9.980
10 0.231 4.325 0.030 0.036 0.023 0.032 0.006 0.456 9.807
11 0.199 4.080 0.011 0.009 0.009 0.008 0.002 0.431 10.033
12 0.217 4.342 0.009 0.011 0.005 0.005 0.001 0.434 9.589
13 0.236 4.136 0.060 0.077 0.040 0.060 0.014 0.465 9.890
14 0.204 4.343 0.042 0.057 0.037 0.040 0.006 0.463 9.832
15 0.214 4.949 0.023 0.027 0.021 0.020 0.003 0.465 9.786
16 0.200 4.845 0.012 0.028 0.026 0.013 0.002 0.439 9.748
17 0.191 4.372 0.004 0.004 0.007 0.004 0.000 0.432 9.456
18 0.213 4.894 0.009 0.025 0.016 0.010 0.004 0.442 9.617
19 0.214 4.095 0.048 0.066 0.035 0.041 0.006 0.450 9.776
20 0.211 4.035 0.073 0.057 0.033 0.040 0.005 0.433 9.876
AVG 0.216 4.410 0.034 0.039 0.025 0.027 0.006 0.433 9.784
Std. Errors 0.0037 0.0070 0.0044 0.0054 0.002 0.0033 0.0009 0.0020 0.0050
Figure 13. Facility Queue Times
As seen in the above figure, the engine facility has the longest queue time. The
major factor that causes long cycle times is the queue in the engine facility. Note that the
average waiting time is around 10 months. In this scenario, the engine facility is a
bottleneck in the overhaul maintenance process. Figure 14 shows the waiting times in the
engine facility within a 300-month period.
52
50
~ 40 i= 30 C)
.5 20 -~ 10 0
Engine Facility Queue Times
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
N ~ ~ ro o N ~ ~ ro o N ~ ~ ro o ~ ~ ~ ~ ~ N N N N N ~
Time
Figure 14. Engine Facility Queue Times
There are two reasons for long queues in the engine facility. One of them is the
number of engines per ships to repair. Since each ship has at least two engines, the
number of arrivals at the engine facility is larger than number of ships. For example, the
engine facility has to repair six engines for a large ship, while the dry dock facility is
taking care of one large ship. As seen in Figure 10, number of engines to be repaired in
the engine facility is four times higher than number of ships to be repaired in the drydock
facility.
The other reason for long queues in the engine facility is that the engine facility
has the longest process time in the shipyard. Since we cannot change the number of
engines on the ships, attempting to reduce the number of engines through organizational
changes would be impossible. The manageable cause of the bottleneck is long process
time in the engine facility, this factor is the one that can be addressed to improve
productivity.
53
The gun facility has the second longest queue times within the system for the
same reasons as the engine facility queue (i.e., multiple weapons on each ship). The
queue times of other facilities are not significant in this system.
Another statistical result from summary report is the facilities' utilization values.
The facility utilization values are shown in Figure 15 below.
Average Utilization Values
Replication Electric Dry dock Anchor Engine Paint Wooden Navigation Electronic Gun
1 0.169 0.211 0.190 0.939 0.116 0.147 0.152 0.144 0.761
2 0.168 0.210 0.185 0.939 0.113 0.155 0.147 0.141 0.760
3 0.173 0.209 0.187 0.939 0.115 0.157 0.156 0.141 0.760
4 0.178 0.200 0.186 0.939 0.114 0.152 0.156 0.140 0.758
5 0.175 0.209 0.191 0.935 0.115 0.148 0.153 0.143 0.761
6 0.170 0.204 0.189 0.939 0.116 0.151 0.154 0.142 0.754
7 0.168 0.204 0.187 0.938 0.113 0.154 0.151 0.142 0.757
8 0.173 0.209 0.188 0.937 0.111 0.154 0.158 0.145 0.762
9 0.172 0.207 0.185 0.939 0.113 0.154 0.153 0.146 0.766
10 0.171 0.209 0.188 0.938 0.111 0.155 0.153 0.143 0.761
11 0.170 0.210 0.185 0.939 0.115 0.155 0.150 0.143 0.750
12 0.169 0.210 0.185 0.936 0.115 0.154 0.147 0.144 0.760
13 0.170 0.207 0.186 0.939 0.114 0.151 0.152 0.148 0.756
14 0.172 0.205 0.188 0.937 0.119 0.150 0.151 0.142 0.760
15 0.169 0.205 0.186 0.936 0.112 0.157 0.152 0.146 0.755
16 0.167 0.205 0.187 0.938 0.117 0.149 0.154 0.143 0.757
17 0.168 0.209 0.185 0.938 0.117 0.150 0.154 0.141 0.760
18 0.172 0.203 0.188 0.936 0.114 0.149 0.153 0.144 0.753
19 0.169 0.204 0.186 0.939 0.118 0.157 0.152 0.142 0.756
20 0.172 0.209 0.184 0.939 0.116 0.149 0.147 0.142 0.760
AVG 0.171 0.207 0.187 0.938 0.115 0.152 0.152 0.143 0.758
Std. Error 0.0005 0.0006 0.0004 0.0002 0.0004 0.0006 0.0006 0.0004 0.0007
Figure 15. Utilization Values.
The facilities that have longer queue times become busier than the other facilities.
Therefore, facilities with long queues have higher utilization values. Here, the engine
54
facility has the highest utilization, eighty nine percent. The engine facility is free only
eleven percent of the time. The paint facility has the lowest utilization, since it has the
shortest queue times.
C. POTENTIAL IMPACTS OF AN INCENTIVE SYSTEM
The current productivity of the shipyards shows that, on average, each type of
ship spends five months longer than the standard overhaul time in the shipyards. This
delay is created by the long process times. This delay lowers the operational availability
of the ships and Naval readiness.
The first potential impact of an incentive system could be decreasing process
times. This decrease will lower overhaul cycle times. According to the examples of
incentive system implementations giv~n in Chapter IV, some organizations benefit from
using group incentive systems or non-monetary incentives. For example, after
implementing such an incentive system and non-monetary, incentives, the Rock Island
Arsenal and the Veterans Affairs Health Care Network improved their productivity levels
by 17 and 20 percent, respectively. We can use these figures in our simulation model to
estimate the potential improvements if we implement a group incentive system with non
monetary incentives. Decreasing the process time of the engine facility by twenty percent
dramatically improves the cycle times of each ship type. Figure 16 shows the results of
the simulation model with a twenty- percent shorter process time in the engine facility.
55
Average Cycle Times Operational Availability
Replication Large Medium Small Large Medium Small
1 11.741 8.101 9.063 0.732 0.771 0.744
2 11.570 7.929 8.943 0.734 0.775 0.746
3 11.856 8.204 9.175 0.730 0.769 0.741
4 11.649 8.044 9.013 0.733 0.772 0.745
5 11.617 8.058 8.483 0.733 0.772 0.756
6 11.650 8.118 8.390 0.733 0.771 0.756
7 11.773 8.161 8.239 0.732 0.770 0.757
8 11.606 8.728 9.057 0.733 0.759 0.744
9 11.899 8.245 9.206 0.727 0.768 0.741
10 11.621 8.001 8.518 0.733 0.773 0.755
11 11.584 8.077 8.111 0.734 0.772 0.760
12 11.602 7.993 9.040 0.733 0.773 0.744
13 11.897 8.216 9.072 0.730 0.769 0.743
14 11.801 8.177 9.104 0.731 0.770 0.743
15 11.361 8.329 7.528 0.736 0.767 0.773
16 11.668 8.083 7.964 0.733 0.772 0.763
17 11.734 8.114 9.112 0.732 0.771 0.743
18 11.618 8.319 9.096 0.734 0.767 0.743
19 11.702 8.089 8.913 0.732 0.772 0.747
20 11.690 8.090 8.198 0.732 0.772 0.758
AVG 11.682 8.154 8.711 0.732 0.770 0.750
Std. Errors 0.0275 0.0370 0.1070 0.0004 0.0007 0.0019
Figure 16. Cycle Times and Operational Ava~lability with Shorter Process Time
As seen in Figure 16, shorter processing time significantly reduces cycle times.
With a twenty- percent lower processing time, the cycle times decrease by twenty eight
percent for large ships, thirty six percent for medium ships, and twenty nine percent for
small ships. When we measure the productivity of the shipyards according to the
overhaul cycle times, the potential average improvement in productivity is twenty four
percent.
Shorter processing time would also increase operational availability of the ships.
The increase in operational availability is eight percent for large and small ships, and ten
56
percent for medium ships. On average, nine percent more ships will be operational at any
time. This increase in operational availability will also increase the Navy's readiness.
The decrease in process times also affects queue times in the facilities. The ships
or parts will not wait as long for service as they did previously. The queues and the queue
times of the facilities will be shorter.
With a twenty four-percent improvement in productivity, the shipyard will
potentially save money. For example, assume that cost of overhaul maintenance is
$15,000 per large ship, $10,000 per medium ship, and $5,000 per small ship per month.
Shortening the cycle time for each type of ship by twenty four percent, which is
approximately five months, will save the shipyard $75,000 per large ship, $50,000 per
medium ship, and $25,000 per small ship. When we do the same calculation for all of the
ships in the Turkish Navy, the benefit would be extremely high. Compared to this saving,
our proposed incentive system cost almost nothing, because it uses non-monetary
incentives. In this case, it is very possible that potential benefits of a group incentive
system with non-monetary incentives will exceed the cost of this incentive system.
As we reviewed in Chapter IV, some companies saved millions of dollars from
implementing incentive system similar to those proposed here. For example, an Amoco
Plant saved $18 million, and American Airlines saved $50 million. In conclusion, it is
worth implement our proposed incentive system at Turkish Naval Shipyards, because
they might save similar amounts as those mentioned above.
57
VI. CONCLUSIONS AND RECOMMENDATIONS
A. IDENTIFICATION OF AN ALTERNATIVE INCENTIVE SYSTEM
The shipyards currently have compensation systems that include incentives such
as early promotion, performance awards, special act awards, Navy-wide honorary
awards, and invention awards. The current levels of productivity in the shipyards,
reviewed in Chapter II and Chapter VI, also offer proof that the current compensation
system is not effective. Chapter II addresses the weakness of this compensation system in
detail. As such, it is obvious that shipyards need an alternative incentive system that can
be implemented to improve productivity within the shipyards.
Chapter III discusses the types of incentive systems currently in use in the public
and private sectors. Chapter IV examines the existing barriers to implementing an
alternative incentive system. Determining which systems are feasible under the existing
constraints can help identify an alternative incentive system. Ofthe alternative incentive
systems and incentives discussed, a group incentive system (including non-monetary
incentives), is the most viable recommendation for the Turkish Naval Shipyards.
A group incentive system is recommended for shipyards for two primary reasons.
First, group incentive systems are superior to the other incentive systems because:
o Group incentives focus on individual performance found in individual incentive
systems.
o Group incentives require less effort to implement and maintain than individual
incentive systems.
58
o Group incentives provide more focus on the individual than organizational
incentives.
Group incentive systems are also most easily integrated into the existing work
environment and culture in Naval shipyards, which is characterized by a number of
established teams at each facility. Therefore, it is easier to implement a group incentive
system than the other incentive systems, because group incentives encourage people to
work as members of a team and to contribute to the team's performance. The cultural
profile of the shipyards' personnel suggests that it is much easier to reward group
achievements than individual achievements, since the relationship among the employees
does not allow for objectively determining eligibility for awards.
For the regulatory and budgetary reasons previously mentioned, non-monetary
incentives are the most viable incentives for shipyards. Non-monetary incentives are
personal and flexible, and do not entail great effort and expense. Non-monetary
incentives may also have immediate impacts on employee productivity. Possible non
monetary incentives for the shipyards include: (1) opportunities to attend training or
courses offsite; (2) additional vacation; and (3) recognition.
Recognition is the best way of using non-monetary incentives. (Nelson, 1996)
Some forms of recognition that can be implemented at the shipyards are listed below:
• Recognition items such as mugs, t-shirts, bags, pencils, calendars,
calculators, key chains in the event of individual or group achievement
• Letters of appreciation or a certificate of appreciation
• A Commandant's Bulletin article about an employee's or group's
accomplishment
59
• A handshake from the Commanding Officer of the shipyard at a meeting
• Recognizing efforts at a meeting in the presence of all employees
• Creating a wall of fame with photos of outstanding employees or groups.
• Extend employee's lunch period for a day
• Authorize managers to hand out lunch coupons
• Public acknowledgement when discussing an employee's or group's
ideas with other people, peers, or especially higher management.
These recommended recognition forms are listed by priority based on the author's
two-year experience at Turkish Naval Shipyards. The top four recommended recognition
forms will be reviewed in more detail in the following two paragraphs.
Recognition items and letters of appreciation are likely the most effective forms
of recognition, because most employees like to display such items or certificates in their
office. Within the current culture, most of the employees feel happy and exited when they
are able to show others that management appreciates their success. Since such
recognition items and certificates are easy to display, employees mostly prefer these
tangible recognition items.
Articles in Commandant's bulletin about an accomplishment or a handshake from
the Commanding Officer are also valuable for the employees. When we recognize a
group, the group members get prestige. Prestige is a very important and respectful asset
among the employees at the shipyards. Employees generally want other employees to be
there when they are recognized, or their accomplishments to be known by everybody at
the shipyard.
60
B. INCENTIVE SYSTEM IMPLEMENTATION RECOMMENDATIONS
It is recommended that the shipyards review their mission statements and
organizational goals prior to implementing an incentive system. The shipyard
management should make sure that every individual clearly understands the shipyard's
mission and the goals.
The shipyard management should immediately discontinue the current, superficial
compensation system. The feasibility of existing incentives should be examined within a
new group incentive system. The feasible incentives can be included in the new group
incentive system, and others should be eliminated.
The incentives must be determined prior to implementing a system. Each
employee should clearly understand the relationship between performance and the
incentive. Additionally, the incentives must reward the desired group behavior.
Prior to implementing a group incentive system, the Turkish Naval Shipyards
need to survey their employees to determine what the employees want. Once employee
desires are determined, a group incentive system can be aligned with the shipyard's
individual and organizational goals.
A group incentive system has the advantage that it can be tested on selected teams
to determine its effectiveness prior to implementation on a larger scale. The teams in the
engine facility should be used as the test subjects prior to shipyard-wide implementation,
as this facility is the primary bottleneck in the overhaul maintenance process.
The managers who are able to nominate groups for an incentive or to give
incentives must be empowered to nominate eligible groups for incentives and to give
61
incentives. These managers should be encouraged to be flexible in implementing the
incentive system.
The feedback mechanism during the implementation must collect accurate and
timely results. The impacts of the new incentive system on the shipyard's productivity
must be reviewed periodically. These results must also be available to every employee. If
necessary, changes in incentives should be based on these results.
The shipyard management must consider employee ideas about the incentives and
their implementation. The shipyard management must respect the employees' creative
efforts to improve the effectiveness of the incentive system.
C. CONCLUDING COMMENTS
An alternative incentive system, when properly implemented and maintained, can
improve productivity and quality at the Turkish Naval Shipyards. While there are
constraints to incentive system implementation in the current environment, it is possible
to implement a new incentive system under these constraints.
This thesis recommends that a group incentive system, which uses non-monetary
incentives, be implemented at the Turkish Naval Shipyards.
62
LIST OF REFERENCES
1. Glossary for P A http://www.edweb.sdsu.edu/edwebfolder(accessed 01/15/2000)
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